Sabra Health Care REIT (Nasdaq: SBRA), in a Monday statement to shareholders, said it will use an $11.9 million letter of credit to fund rent for Avamere Family of Companies from September through November.
Wilsonville, Ore.-based Avamere leases 27 skilled nursing facilities and one continuing care retirement community (CCRC) with Sabra. The portfolio made up 8% of the Irvine, Calif.-based real estate investment trust’s revenue for the past six months, ending June 30.
Properties in Oregon, Colorado and Washington have been hard hit by the COVID-19 delta variant, Sabra said, and state-mandated admissions limitations associated with COVID cases as well as labor issues have led to census drop, labor cost spikes and cash flow constraints.
In May, Avamere bumped its staff wages by up to $4 an hour too, making it “the highest standard” for nursing homes in Oregon at the time.
The expected release of Provider Relief Funds could have a “significant impact” on Avamere’s position post-November, Sabra stated.
The Biden administration on Friday announced that $25.5 billion in new funding will be made available to health care providers affected by the COVID-19 pandemic. Funding includes $17 billion from phase four of the PRF, and $8.5 billion from the American Rescue Plan.
“We have been fortunate in that our tenants have not required substantial rent deferrals or other relief to this point,” Rick Matros, CEO and chairman of Sabra, said in a statement. “However, Avamere faces additional challenges, including from the stricter approach on admissions taken by Oregon, Colorado and Washington.”
Matros said Avamere buildings have not experienced above average infection rates, compared to the increase seen in surrounding communities. The operator is working to open COVID-specific units in Oregon and Washington to help local hospitals overrun with cases, continued Matros.
If it turns out Avamere needs additional assistance beyond government funding announced, Sabra said it will offer a one-time write off of $44 million in straight-line rent receivables and above-market lease intangible assets.
The operator will “provide us additional credit enhancements,” Sabra stated in the release, along with paying back the credit letter over time. Other business endeavors will help replenish cash flow too, but the REIT didn’t specify what those might be.
In the same statement, Sabra announced an expanded relationship with rehabilitation provider Recovery Centers of America, backed by an expected $325 million mortgage loan covering eight inpatient addiction treatment centers located in the Northeast and Midwest.
The loans, if issued, will be for a five-year term with 7.5% interest each year.
This would be Sabra’s second transaction with RCA — the first of which was to acquire and fund the redevelopment of Recovery Centers of America at Monroeville in Pennsylvania.
Companies featured in this article:
Avamere Family of Companies, Recovery Centers of America, Sabra Health Care REIT
